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Artificial intelligence (AI), voice-recognition technology and fast connectivity – critical ingredients for smart speakers, smart home technologies and smartphones – will help spur overall U.S. consumer technology industry revenue to $377 billion in retail revenues in 2018, a six percent increase, according to the Consumer Technology Association (CTA). The mid-year update of CTA’s flagship report, U.S. Consumer Technology Sales and Forecasts, also shows whole home Wi-Fi solutions, wireless earbuds and augmented/virtual reality headsets will each cross the $1 billion wholesale revenue milestone for the first time this year.

“Innovations in AI, voice and connectivity are making tech devices more helpful and versatile, and changing our lives for the better,” said Gary Shapiro, president and CEO, CTA. “And thanks in part to economic factors including tax reform and high employment driving our economy forward, even more consumers are bringing these remarkable tech innovations into their lives. Although tariffs and the trade war threaten to unravel the strong economic momentum driving tech adoption and sales, the current state of the industry is exciting and healthy going into the second half of the year.”

The CTA forecast reflects U.S. factory sales-to-dealers for more than 300 consumer tech products, and related software and services. The biannual report serves as a benchmark for the U.S. consumer technology industry, charting the size and growth of underlying product categories.

Smart Speakers: Voice-controlled smart speakers, including Amazon Echo, Google Home and Apple HomePod, are experiencing a meteoric rise not seen since tablets. CTA expects the category to sell 39.2 million units (44 percent growth over 2017) and reach $3.2 billion in revenue (64 percent growth) after only three years on the market.

Whole Home Wi-Fi Solutions: Also known as mesh networks, devices such as the eero Home Wi-Fi system, Google Wi-Fi or Netgear Orbi, are experiencing substantial growth due to their simple home network set-up and ability to provide strong internet coverage throughout the home. These devices will cross the $1 billion revenue milestone for the first time in 2018 (103 percent increase) and sell 4.3 million units (115 percent increase).

Drones: Total drone sales are expected to reach 3.4 million units (eight percent increase) and just over $1 billion in revenue (four percent growth) in 2018, as more consumers and businesses adopt drones for photography, recreation, drone racing and more.

As some companies turn their focus from fitness trackers to smartwatches, this sub-category is expected to sell 15.3 million units shipping in 2018, a 26 percent increase over 2017, with revenues of $3.7 billion, a 19 percent increase.

“The new Internet of Things is the ‘Intelligence of Things’,” said Steve Koenig, vice president of market research, CTA. “Connected products tap AI to enhance services, especially in categories including smartphones, connected cars and smart home devices. And with 5G on our doorstep – the first 5G products will hit the market this year – we’re crossing into a new phase of faster and smarter connected devices.”

Top 3 Revenue Drivers – The Three Screens

The top three revenue drivers of the industry showing continued strength:

Smartphones: After the introduction of premium, flagship models from major manufacturers, smartphones performed better than expected in 2017 as consumers showed more interest in high-end models. In recognition of rising average wholesale prices, CTA upwardly adjusted 2017 and 2018 smartphone revenue to $69 billion and $78 billion respectively, reflecting a 13 percent revenue increase in 2018. Unit shipments are expected to grow one percent to 169.4 million in 2018.

2019 will mark the introduction of the first smartphones with 5G connectivity on the market. CTA expects 2019 U.S. sales will reach 2.1 million units and cross $1 billion in revenue, with triple digit increases through 2021.

Televisions: Total digital displays demonstrated strong performance in 2017 and as a result, consumer demand in early 2018 slowed. CTA now projects total unit sales of digital displays will reach 40.4 million units (six percent decrease from 2017), while higher average wholesale prices hold total revenue at $21 billion, on par with 2017. Future category growth will be driven by Next Gen screen technology.

Streaming Services Rise: Consumer expenditures on subscription music and video streaming services are projected to reach $19.7 billion in revenue in 2018 (38 percent higher than last year). Spending on video streaming content (e.g., Netflix, Hulu and Sling TV) is expected to reach $13.4 billion in revenue, and on-demand audio content (e.g., Spotify, Pandora or Apple Music) is projected to bring in $6.3 billion in revenue in 2018.

“We are undergoing a huge shift in how people consume content,” said Rick Kowalski, senior manager of market research and business intelligence, CTA. “Video streaming services are offering an increasing amount of exclusive content, and live TV streaming options are becoming widely available this year – and that has more consumers exploring their over-the-top video options. Music streaming services continue to gain subscribers at a furious pace, luring regularly paying music listeners with attractive introductory offers and benefits such as ad-free listening. This remarkable growth in streaming services shows us that the phrase ‘content is king’ is more relevant than ever.”

CTA publishes the U.S. Consumer Technology Sales and Forecasts twice a year, in January and July, reporting U.S. factory sales-to-dealers. It was designed and formulated by CTA, the most comprehensive source of sales data, forecasts, consumer research and historical trends for the consumer technology industry. Multi-year projections cannot account for unpredictable factors such as changes in tariffs, trade laws, interest rates and federal policy. For more information, visit CTA.tech/salesandforecasts.